Today feels like a particularly dangerous moment in time for an investor.
Forward looking economic indicators are starting to show significant weakness, perhaps anticipating that the impact of higher rates are starting to be felt across the economy.
Two year bond yields in the US, UK and Germany have all reached their highest levels since pre the financial crisis.
However, as Milton Friedman famously noted, monetary policy operates with long and variable lags.
A number of central banks have indicated that they have reached or are close to the top of their hiking cycles, perhaps conscious of these lags.
The world’s second largest economy, China, is already in this situation and has started to cut interest rates. All of the chatter around the Chinese economy currently relates to what level of stimulus is appropriate against the backdrop of a rapidly deflating property sector.
Our thesis remains that if faced with a significant deflationary impulse and a severe recession, governments and central banks will go back to what they know best.
That is, more stimulus, more money printing, more Government spending.
But we should be under no illusions, it could be a very rocky road ahead.
That is why we are focusing on companies that are in an excellent financial position and operate in industries that are vital to the world.
The company we feature today might just be in the most misunderstood industry of all.
We also provide portfolio updates on almost every company in the portfolio in what was a very busy month for earnings.
“Our civilization is founded on coal, more completely than one realizes until one stops to think about it.” George Owell – The Road to Wigan Pier, 1937 The Original Black Gold Before oil, there was coal. It was coal that powered the industrial revolution in the UK and then across the world. And it is…
